We Wonder Why

NEWS

Farmington, Connecticut – May 15, 2025 – Horizon Technology Finance Corporation (NASDAQ: HRZN) (“Horizon” or “HRZN”) (the “Company”), an affiliate of Monroe Capital, and a leading specialty finance company that provides capital in the form of secured loans to venture capital and private equity backed and publicly traded companies in the technology, life science, healthcare information and services, and sustainability industries, announced today that, as part of the Company’s succession planning, Robert D. Pomeroy, Jr. will retire as Chief Executive Officer (“CEO”) of the Company and Gerald A. Michaud will retire as President of the Company, both effective June 5, 2025.

Concurrently, the Board of Directors of the Company (the “Board”) has appointed Michael P. Balkin to succeed Mr. Pomeroy as CEO of the Company. Mr. Pomeroy will remain Chairman and an interested member of the Board after his retirement. Mr. Michaud will remain involved with the company through the end of the year.

Having previously served as an independent director of the Company since June 2023, Mr. Balkin will build on the heritage of Horizon by continuing to grow the venture debt portfolio with a renewed focus on high quality, small-cap growth companies. As CEO of Horizon, Mr. Balkin will leverage his three decades of experience and expertise as a Partner and Co-Manager of the Small-Cap Growth Fund at William Blair and Partner and Chief Investment Officer at Magnetar Investment Management, a wholly-owned subsidiary of Magnetar Capital, a multi-strategy hedge fund.

“Mike’s knowledge and experience in investment and portfolio management and construction, as well as his more than three decades of work growing small-cap and technology companies as a portfolio manager and board member makes him an excellent choice to lead Horizon during its next phase of growth,” stated Mr. Pomeroy. “The Board and I believe Mike will lead the continued expansion of the Horizon platform and drive long-term value for HRZN’s stockholders, and we are excited to work with him.”

“I want to congratulate Rob and Jerry on their well-deserved retirements. They will remain a vital and active voice for Horizon in their respective continued roles,” said Theodore L. Koenig, Chairman and CEO of Monroe Capital. “This planned leadership succession reflects the vision of the Company’s management team and Board of Directors, who have worked collaboratively to ensure a seamless and effective transition of responsibilities. Mike is the right leader to guide Horizon into its next chapter.”

“I am honored to be stepping into the role of CEO of Horizon and build upon the solid foundation laid by Rob and Jerry’s team over the past 20+ years to further expand the Horizon platform,” said Mr. Balkin. “We will continue to focus on diversification, mitigation of risk and portfolio growth while remaining true to Horizon’s investment objective of maximizing return by generating current income from debt investments and capital appreciation from the warrants it receives when making debt investments.”

May 15, 2025 – Horizon Technology Finance Press Release.

ANALYSIS

The Way Things Are

As we all know, businesses – including BDCs – are rarely forthright about managerial changes.

We get the impression from the circumstantial evidence here that we are not getting the full story.

Here is our reasoning:

First, typically effective retirement planning does not include the departure of both the CEO and President at the same time from their roles.

Furthermore – although Mr Pomeroy remains Chairman of the Board – neither he nor Mr Michaud appear to have any operational role going forward.

That’s a very sharp change.

Secondly, it’s rare for a long planned change to involve a new CEO to be plucked from the ranks of the “independent directors”, as is the case here.

More typically, an existing manager within the senior ranks of the external manager would be chosen or a search would be undertaken to recruit an appropriately experienced individual.

Resume

Not to impugn Mr Balkin in any way, but his experience as a hedge fund manager and small cap portfolio manager at William Blair for 30 years does not seem ideally suited for the task at hand.

Here is a bio published before the recent accession which makes clear – in our view – that Mr Balkin has no relevant experience in the origination, underwriting and management of venture-debt investments:

Mr. Balkin has over 35 years of capital market experience working with both public and private companies and is currently a Portfolio Manager at Rail-Splitter Capital Management, a Chicago-based asset management firm specializing in small cap stocks. He recently served as the Chief Executive Officer and a Director of a public company called Foresight Acquisition Corporation, where he led the merger with a $2.2 billion-dollar private health care company.

Prior to Foresight, Mr. Balkin was a partner and formerly the co-Manager of the William Blair Small Institutional portfolio and the William Blair Small Cap Growth Fund, which he and his partners started in 1999. He and his team managed nearly $1.8 billion dollars in total assets and were named among the top small cap funds multiple times by publications such as Barrons, Morningstar, Lipper, and Institutional Investor Magazine. Mr. Balkin was also a frequent guest on CNBC and Bloomberg discussing his views on small cap stocks.

From 2005 to 2008, Mr. Balkin was a partner at Magnetar Capital, LLC, a multi-strategy hedge fund located in Evanston, Illinois. While at Magnetar, Mr. Balkin was the Portfolio Manager in charge of the small cap long-short strategy and was also the Chief Investment Officer of Magnetar Investment Management, a wholly owned asset management subsidiary of Magnetar Capital. He rejoined William Blair & Company in 2008. He originally joined William Blair in 1990, working in the sell-side institutional research sales group, specializing in small cap growth companies.

His sudden accession suggests more of a need to quickly fill a gap.

New Paperwork

Finally, another clue that this was not a long and thoughtfully planned managerial change is that HRZN was in the midst of its annual preparation for its shareholder meeting.

The just announced changes has required the filing of an emergency amendment to the Proxy Statement.

VIEWS

Not “Transparent”

The BDC Reporter does not believe HRZN’s shareholders – and any prospective investors – are getting the full story here.

That may be the way of the corporate world but it’s a great shame when considered alongside the very weak financial and stock price performance shareholders have endured in recent years.

As covered many times on these pages, HRZN has seen its net asset value per share (NAVPS) drop by (34%) in the last 5 years, including a decline of (22%) in the last 12 months, of which (10%) occurred in the just completed quarter. See the NAV Change Table.

The most recent percentage drop in NAVPS was the largest amongst all the BDCs we tracked in what was not a very good quarter for many BDCs.

A Lot

Moreover, as this chart shows, since peaking in late 2021, HRZN has seen its stock price drop by more than half.

YTD in 2025 – according to Seeking Alpha – the stock is down (16%) – the sixth worst performer.

Over a 12 month period, the price drop comes to (36%) – the 3rd worst performance.

On a total return over the last 3 years – again leaning on Seeking Alpha – HRZN is down (10.8%) – the 4th worst BDC performer.

Only the very high interest rates of recent years – and the dividends paid out by HRZN – have kept BDC shareholders from an even worse return.

Right Move

It’s not unreasonable that after such a long period of poor performance changes might be made in the C-suite.

However – in our mind – the BDC – and the new-ish owner of the BDC’s external manager Monroe Capital – have missed an opportunity to address this under-performance and have not taken the confidence building measures that would be appropriate.

These would include permanent changes in how the external manager is compensated (versus temporary waivers recently announced) and placing a more appropriate venture-debt experienced CEO at the helm.

In the absence of such measures – and of a more forthright discussion with the BDC’s stakeholders about HRZN’s setbacks and plans for a turnaround – there is a danger that the slide in NAVPS and stock price will continue.